Repeated predictions of the world's oil shortage in coming years simply failed to account for our ability to tap into deeper, more complex seams of energy, buried under the ocean floor or the Arctic tundra. It may become more expensive to get at those new pockets of oil, but it's hard to see how we'll run out of "black gold."
And frankly, the whole discussion is becoming moot -- because our global need for oil is about to peak and eventually decline. As that happens, the economics of the entire energy sector are set to change radically.
No More Super-SpikesJust five years ago, the global economy was deeply shaken by a huge spike in oil prices. China's rising demand led to fears that oil supplies simply couldn't keep up with an inexorable rise in demand.
To be sure, emerging market economies such as China and India continue to expand. As a result, their oil consumption is expected to keep rising. Yet the rate of growth will sharply slow. For example, China's government policies now aim to boost demand for more efficient cars, electricity-aided buses, while tougher building design codes and a raft of other efficiency gains also blunt the country's energy growth.
Yet in the rest of the world, these dynamics are already playing out, which explains why oil demand is about to peak. Here are some quick examples:
·In the Middle East, plans are afoot to switch power plants from oil to natural gas, leading analysts at Citigroup to forecast that the region will consumer two million less barrels of oil per day by the end of the decade.
·Here in the U.S., the fuel mileage of new cars is increasing by 3% to 4% annually. According to the University of Michigan, the average new car now gets more than 30 miles per gallon. That's up from 25.6 miles per gallon in August, 2008.
·The global plastics industry is quickly transitioning from expensive crude oil to cheaper natural gas.
·LED light bulb adoption is set to steadily reduce household electricity consumption, especially now thatGE (NYSE: GE) is making a big push.
·Ships, trains and trucks are also starting the slow conversion away from diesel power and toward liquefied natural gas.
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